Back to Basics: How to Start Investing

Peter Hafner |

The basics:

In recent blogs, I have addressed a wide variety of topics I believe you will find of interest. My goal is to help educate you and provide you with one more way to be in touch with us.

In this blog, I want to take a bit of a different approach, discussing what you need to know to get started as an investor.

If you have a financial plan, are approaching retirement, or are enjoying retirement today, you’ll find these basics to be an excellent refresher, and we are confident you’ll find a number of solid takeaways.

Remember when you were in high school or college and you were assigned a term paper? I do. Staring at a blank page and writing the first sentence always seemed to be the most daunting part of the project. While I always completed the assignment, I must admit, procrastination always increased my stress level until I buckled down and began the task.

Getting started with saving and investing is similar. You know it’s something you need to do, yet you hesitate. The first step is the toughest, but once you begin, you’ll be well on your way and a weight will be lifted from your shoulders.

Set a Goal

First of all, before you begin to save, you must come up with a goal, which is our ‘why’ or reason to save. Think about it. Why should you sock money away, when you could enjoy it today?

If you are saving just to save, it’s easy to get knocked off track. Years ago, I had a friend who saved $300 per month in what he called his “go to hell” fund. There’s nothing like having a cushion to fall back on just in case.

Others may want to save for a down payment on a home, retirement, their kids’ college education or something else. Goals are personal, but they keep you focused on the end result. If you have a goal, you’re more likely to keep at it when hurdles inevitably arise.

Understand why you are doing without today so you can achieve something better tomorrow. If not, it’s too easy to get sidetracked.

Be a student, get educated, and act

Know what’s required to become a successful investor. There are a number of reputable sources available. Or simply reach out to us and we would be happy to make an outline available to you.

Dig into the basics. You probably understand what a savings account is, but what is a stock, a bond, a mutual fund, and an ETF (exchange-traded fund)? These securities will make up much of your savings plan.

Design a plan and implement that plan. This takes effort. But at this point, you’ve moved well beyond square one.

Please be very leery of get-rich-quick schemes or loading up on unknown companies that promise riches. For every Amazon or Apple, there are thousands of companies that fail to get out the starting gate, leaving investors holding worthless paper.

Understand the importance of diversification. Investing comes with risk, but risk can be managed. You don’t want all of your eggs in one basket.

Recognize that day-to-day volatility is inescapable, but running to cash when uncertainty arises comes with a trade-off: your longer term goals.

If you veer from your investment plan, you’ll be putting your goals at risk by accepting a diminished return over a longer period.

Realize that a well-crafted investment plan tailored to your goals incorporates the inevitable pullbacks in the market.

Are you ready to get started? Are you ready to commit? The sense of satisfaction you’ll experience once you’re underway will be enormous.

If you have additional questions, I’d be happy to get you pointed in the right direction. Just ask. That’s what we’re here for.